While we still may be years out before we see any significant number of residential units hit the market in former downtown office buildings, at least eight landlords of downtown buildings are putting out feelers with the city about converting — and the developer behind 100 Van Ness is eyeing a big building on Spear Street.
The story of the last few years is that lots of downtown SF office space is sitting empty, or half empty, and companies that have the chance to get out of big leases when much of their workforce is now remote are doing just that. This likely won't be the case forever, and certain types of businesses require more face-time and in-person interaction and always will.
Still, some landlords of office buildings in SF may want to escape the office market altogether, and in June, the city put out a Request for Information, seeking to locate these landlords and better understand what their needs and financial obstacles may be.
Today the Chronicle reports that the city received eight responses from SF landlords, and while we don't know the building addresses, we're told "five of the buildings are in the greater Mid-Market and Civic Center neighborhoods; two are in the Financial District and one near Yerba Buena," and all were built before 1967. The total approximate yield of residential units from the buildings would be around 1,100, with the largest building in the bunch being 300 units.
Converting an office tower into residential could involve a full-scale gut down to the frame, which is essentially what happened with 100 Van Ness a decade ago. That building, constructed in 1974 and formerly home to the California State Automobile Association (CSAA), looked very different before developer Emerald Fund stepped in, and it was transformed into the glass-facade building it is now.
Per the Chronicle, Emerald Fund has been actively hunting for another residential-conversion project, and the company's CEO was recently touring 201 Spear Street — an 18-story property built in 1986 that is facing foreclosure.
The only building currently in an active conversion process is the historic Warfield Building — the top five floors of offices above the Warfield Theater and other retail spaces, anyway. The SF Business Times reported on the conversion project last December, and now the Chronicle says that construction drawings have already been submitted to the city and interior demolition work may begin next month. In total, that building will become home to 27 units of new housing.
The building had been home to the offices of Spotify in the last decade, before the company moved out in 2018, reportedly over concerns for worker safety (another indication that those mid-Market blocks weren't so great five years ago when the downtown economy was better either).
Not all developers and building owners see residential conversion as a viable thing, given the complexities and expense involved. Barry DiRaimondo, chairman and CEO of SF-based developer SteelWave, told CNBC in recent weeks that most of these conversions are going to be "unrealistic" in the long-run. And DiRaimondo said his company's play right now is to buy up offices on the cheap and convert them into "office space that people actually want to go to work in."
DiRaimondo adds that the trend of needing to market more state-of-the-art, high-end office spaces in order to make deals has been going on for twenty years. "We've just seen this crescendo [since the pandemic]," he said.
Photo: Google Street View